Always Blame Brexit

For the last few years, diehard Remainer columnists and politicians had settled on a simple tactic. They would innocuously drop into any discussion that Brexit had been a disaster for the British economy. The fact that no evidence was needed nor provided gave these views a particular strength. The suggestion was that this was an accepted wisdom which everyone knew to be true. It was thus hardwired into the DNA of political thought.  The list of perpetrators was large, from former PMs like John Major to Gillian Tett a former FT journalist and now Provost of Maynard Keynes’ old college, King’s College, Cambridge.  John Major views Brexit as “a colossal mistake which has made Britain weaker, poorer and more isolated on the world stage….we walked away from the largest free-trade area the world has ever seen when it was on our doorstep”. [Factcheck: the UK actually has a zero-tariff and zero-quota free-trade agreement with the EU.] The often impressive Gillian Tett more cautiously points out that ‘some analysts suggest that Brexit has made Britain poorer than it otherwise would have been’.

The BBC makes little effort to maintain accuracy. This week, it interviewed prominent Vote Remain spokesperson and former head of ASDA, Lord Stuart Rose and allowed him to say,  “There is no doubt that our economy has shrunk since we left the EU, and that has not been useful for the UK PLC and for UK’s population in general” (BBC radio 4 Today program Oct 22^nd 08.47 am). The fact that this is untrue went unremarked, with no recourse to BBC factcheckers. In the same week, Andrew Bailey Governor of the Bank of England, speaking in Washington DC, said, “If you ask me what is the impact [of Brexit]  on economic growth….the answer is that it is negative for the foreseeable future, but over the longer term there should be a positive, albeit partial counterbalance”.

All of this no doubt contributes to poll findings that a majority regret the Brexit vote (although few would vote to rejoin the EU with all that this would actually entail). The nervousness of Labour about the impact of Brexit policies on their increasingly tenuous working-class support has made them keep their heads down. A need to satisfy the Remain zealots among their MPs means that an EU ‘reset’ was undertaken, but otherwise Labour preferred not to poke the wasp’s nest that is the Brexit debate until now. Suddenly, Rachel Reeves has belatedly begun blaming Brexit for the country’s financial woes and her patent need to raise taxes in defiance of past promises, not least her promise that the increases in her last Budget were a one-off event.

Robert Colville, writing in the Sunday Times, concluded that “Rachel Reeves and her colleagues have known for months that the figures in the Budget will be hideous. So, they need to find someone or something to blame. At last, they have found it; Brexit”. This is cynicism of the first order and rather typical of Labour’s government by slogan. It is unlikely to work with voters, not least because it is not true. Let’s examine the evidence.

Official data shows that the UK economy expanded by 12% from the Referendum in June 2016 up to mid-2025. Moreover, OECD statistics on the same basis show that this growth was ahead of that in Germany, France, Italy and Japan and hence better than all G7 countries except the USA (where a massive Keynesian fiscal expansion has been underway under Trump and Biden) and its neighbour Canada (see chart below). Growth since actually leaving the EU single market in January 2021 was even greater, partly due to a rebound from Covid, and for the same reason was the fastest in the G7, including the USA and Canada.

 Source of data: OECD national currencies

Is there any evidence that Brexit has diminished economic growth at all?  The figures in the table below suggest not. The UK economy actually grew a little faster in the nine years since the referendum than it did in the previous nine years (which included the recession associated with the banking crisis of 2008/9 and the subsequent recovery). This was much the same as Japan and well in advance of Germany, where growth was slower after 2016 than in the previous period.  France and Italy saw an improvement after 2016, but growth in this period was still slower than in the UK.

Source of data: OECD national currencies

All of the claims of a negative impact of Brexit are either forecasts rather than measurements or are based on flawed ‘doppleganger’ methods. The most famous of these is the endlessly repeated claim that the Office of Budget Responsibility (OBR) says that Brexit will reduce economic growth in the UK by 4%.  What the BBC and other media almost never say is that the OBR undertook no calculations to generate this figure. Instead, it took an average of 13 studies undertaken by 13 academic bodies or international organisations such as the IMF, OECD or World Bank. These were all forecasts produced between 2016 and 2019 using a variety of different techniques. The estimates of the impact of Brexit of per capita GDP (over a generally unspecified ‘long-term’) varied widely from 1.8% to 10%. What was obvious was that the results depended on the techniques used. All of the studies estimated the impact of a possible Brexit with a free-trade agreement on the level of trade, but some added an assumption of what is called ‘dynamic productivity’. This is an assumed knock-on impact of the level of trade on labour productivity in each economy. Studies using this approach generated a much larger projected impact of Brexit. Four studies using approaches without this assumption (i.e. techniques based on ‘constant returns to scale’) estimated an average impact of 2.2% which is close to half of the overall average quoted by the OBR.

Articles from BriefingsforBritain authors have examined the dynamic productivity assumption and found that it does not apply to advanced economies, although it does appear to do so in emerging economies. Without this flawed assumption, few studies estimate that Brexit will damage the UK economy by more than a couple of percentage points of GDP, even in the long term. The studies quoted by the OBR, using different techniques which generate disparate results, cannot all be reasonable or correct, but the OBR makes no judgment on their applicability. Instead, it merely takes a broad average over what are essentially apples and pears. Few, if any, commentators bother to point this out.

Instead Remainer commentators quote studies from the Centre of European Reform (CEP) which use a flawed technique to estimate what impact has had on the UK economy since the referendum in 2016. As we have seen above, the UK economy has actually grown at rates similar to other major European economies and at a rate similar to the pre-referendum period. To reach a conclusion that Brexit has damaged economic performance, analysts have thus had to argue that economic growth would have been even faster if the UK had remained in the EU.

The CEP’s ‘doppelganger’ analysis does this by constructing a synthetic index by weighting together the performances of a range of other countries taken to be somehow representative of the UK. These include Greece with all of its post-banking crisis problems, Ireland with its highly distorted macro-economic data and little Iceland with a population as large as a single London borough. The author never reveals that almost none of these comparators have a statistically significant relationship with economic growth in the UK. They are bundled together anyway. In fact, the only country which has a significant relationship with UK economic growth is the USA, and it is the USA which generates the observed post-2016 deviation in performance. Since 2016, the Trump and Biden administrations have generated rapid growth through spending sprees in public expenditure. This has opened up a growth gap with the UK and other European countries since 2016, but one that has nothing to do with Brexit.

None of this will, of course, trouble the Labour leadership. On a sinking ship, any straws must be grasped. As the UK economy continues to grow at rates similar to those in major EU economies, the public will see through Labour’s claims, and all that will be left is another dent in confidence in our political system.